Goldman Sachs reported its third quarter earnings on Tuesday, in the wake of its announced sale of its Personal Financial Management unit, the old United Capital business it acquired in 2019, to Creative Planning. On an earnings call with analysts, Goldman CEO David Solomon said the firm can now focus its efforts on serving ultra-high-net-worth investors, covered by the firm’s Private Wealth Management and Ayco businesses. PFM served a mass affluent clientele.
“Ultra-high-net-worth wealth management is still a very fragmented business, and while we have a leading franchise, with mid-single-digits share, we have less share than that in places like Europe and around the world,” Solomon said.
That business has grown over the last five years, he added.
“By selling United Capital and by selling PFM, which was a small business as you highlight, it allows us to take the resources and the investment we might’ve geared toward growing that and add it to our investment in ultra-high-net-worth growth. And we think that’s a better returning business and something we’re very confident that we can continue to execute on.”
Goldman’s asset-and wealth-management business generated revenue of $3.23 billion, up 6% from the previous quarter. It snapped a streak of three straight quarters of declining revenue in the unit. The bank has been pushing to unwind its historical balance-sheet investments, which are down to $21 billion. The bank also raised $15 billion in gross third-party alternative fundraising. That’s helped management fees in the group climb to $2.4 billion for the quarter.
Overall, the firm reported diluted earnings per share of $5.47, up from $3.08 in the second quarter and down from $8.25 in the year-ago quarter. Net revenues were $11.82 billion, up 8% sequentially and down 1% from a year ago, beating analysts’ expectations, according to SeekingAlpha.com.
Earnings were affected by a $25 million writedown on the PFM business.
Goldman announced the sale of the $29 billion AUM business to Creative Planning in August. That deal is expected to close in the fourth quarter. Since then, many of those advisors have defected to other broker/dealers and RIAs, including Quotient Wealth Partners, a new RIA launched by PFM defectors; Farther; Meridian Wealth Management; and Kestra’s Private Wealth Services unit, to name a few.
Goldman Sachs has filed multiple arbitration claims against former PFM advisors, including those who launched Quotient, to enforce non-compete agreements that these advisors signed.
“PFM advisors made a number of commitments to the firm when they signed their employment contracts, and we intend to hold them to those commitments,” a Goldman Sachs spokeswoman said in a statement. “We take these matters seriously and will take appropriate action against any advisor who attempts to violate their contractual obligations.”
Bloomberg.com contributed to this report.